Wall Street was expecting Best Buy to do something.
Now that it has announced plans to close 50 U.S. stores and open 100 small mobile locations in the U.S. in fiscal 2013, analysts wonder if it is enough.
The big-box retailer on Thursday reported a loss for its fiscal first quarter on charges, although the adjusted results beat expectations. The company expects adjusted fiscal 2013 of $3.50 to $3.80 per share when analysts expect $3.67 a share.
“We thought there was something like this coming,” said UBS analyst Michael Lasser. “We had outlined the potential for a 20 percent reduction in big box square footage, which would lead to $500 million in savings. We got less square-foot reduction, but we got more savings.”
Conversely, Oppenheimer analyst Brian Nagel said he believed the closing of 50 stores is “a much larger number than people have been anticipating.” Nagel also has a $27 target on the stock, with a “perform” rating.
In his view, however, the move is long overdue. “They've been competing with Internet retailers for quite a while, so I think it’s probably the right move," Nagel said.
Lasser of UBS, who has a “neutral” rating and $27 price target on the stock, wonders, “Will what they’re doing work? That remains to be seen." The company’s guidance suggests 2012 will be “another tough year.”
“The desire for electronics has changed very much in the last few years,” he said. “There is one vendor essentially taking all the oxygen out of the consumer electronics complex, which is Apple. Those factors are probably going to continue.”
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Lasser does not own Best Buy shares, but it has an investment banking relationship with UBS. No disclosure information was available on Nagel or his company.